The Square Foot

Crombie REIT Reports Fourth Quarter and Fiscal 2012 Results

Crombie Real Estate Investment Trust (Crombie) is pleased to report its results for the fourth quarter and fiscal year ended December 31, 2012.

2012 Highlights

Funds from operations (FFO) for the quarter ended December 31, 2012 was $0.31 per unit (payout ratio 72.4%) compared to $0.27 per unit (payout ratio 83.9%) for the same period in 2011. Excluding the impact of non-recurring items (see Non-recurring items below), FFO for the quarter ended December 31, 2012 would have been $0.27 (payout ratio 82.7%).

FFO for the year ended December 31, 2012 was $1.09 per unit (payout ratio 82.7%) compared to $1.09 per unit (payout ratio 82.3%) for the same period in 2011. Excluding the impact of non-recurring items, FFO for the year ended December 31, 2012 would have been $1.09 (payout ratio 83.1%).

Adjusted funds from operations (AFFO) for the quarter ended December 31, 2012 was $0.27 per unit (payout ratio 84.6%) compared to $0.23 per unit (payout ratio 100.3%) for the same period in 2011. Excluding the impact of non-recurring items, AFFO for the quarter ended December 31, 2012 would have been $0.23 (payout ratio 99.1%).

AFFO for the year ended December 31, 2012 was $0.92 per unit (payout ratio 98.0%) compared to $0.88 per unit (payout ratio 102.1%) for the same period in 2011. Excluding the impact of non-recurring items, AFFO for the year ended December 31, 2012 would have been $0.91 (payout ratio 99.5%).

Crombie completed the acquisition of two properties and also acquired additional development on two properties in the quarter ended December 31, 2012 totaling $53.1 million, excluding closing and transaction costs; 32 properties totaling $394.0 million have been acquired year to date which increases 2012 year end gross book value to $2.4 billion.

Property revenue for the quarter ended December 31, 2012 of $68.5 million; an increase of $9.8 million or 16.7% over the $58.7 million for the quarter ended December 31, 2011 and for the year ended December 31, 2012 was $256.0 million; an increase of $29.9 million or 13.2% over the year ended December 31, 2011.

Same-asset cash net operating income (NOI) for the quarter ended December 31, 2012 of $32.8 million; an increase of $0.8 million or 2.4%, compared to $32.0 million for the quarter ended December 31, 2011 and for the year ended December 31, 2012, same-asset cash NOI of $132.0 million; an increase of $3.2 million or 2.5% over the same period in 2011.

Occupancy on a committed basis was 93.2% at December 31, 2012 compared with 93.5% at September 30, 2012, and 94.7% at December 31, 2011. Actual occupied space at December 31, 2012 was 92.6% compared with 92.2% at September 30, 2012, and 93.3% at December 31, 2011.

Crombie completed leasing activity on 1,097,000 square feet of GLA during the year ended December 31, 2012, which represents approximately 106.4% of its 2012 expiring lease square footage.

Crombie's 2012 leasing activity included lease renewals during the year on 465,000 square feet at an average rate of $13.49 per square foot; an increase of 5.3% over the expiring lease rate. Crombie's new leasing activity during the year was completed at an average rate of $11.88 per square foot.

Commenting on the annual results, Donald E. Clow, FCA, President and Chief Executive Officer stated: "We are very pleased that 2012 was one of the strongest years in Crombie's history with over $400 million of property acquisitions and development, solid 2.5% same asset cash NOI performance and a significant refinancing of a pool of mortgages. Since 2008 we have invested over $1.1 billion in our focused strategy of building a portfolio of grocery and drugstore anchored shopping centers located primarily in the top 30 markets diversified across Canada such that our total assets at the end of 2012 exceeded $2.4 billion in gross book value and our market capitalization exceeded $1.3 billion. We have started 2013 on solid footing with the recently announced acquisition of four grocery or drugstore anchored shopping centers in Alberta for a purchase price of $132 million."

FFO and AFFO

Crombie's FFO and AFFO had the following results for the fourth quarter and year ended December 31, 2012 and 2011:

(In millions of CAD dollars, except per unit amounts)

Three months ended Dec. 31

Variance

2012

2011

$

%

FFO

$27.351

$19.708

$7.643

38.8%

FFO Per Unit - Basic

$0.31

$0.27

$0.04

14.8%

FFO Per Unit - Diluted

$0.30

$0.26

$0.04

15.4%

FFO Payout ratio

72.4%

83.9%

11.5%

Excluding the impact of lease termination settlement:(1)

FFO Per Unit - Basic

$0.27

$0.27

--

--

FFO Per Unit - Diluted

$0.27

$0.26

$0.01

3.8%

FFO Payout ratio

82.7%

83.9%

1.2%

AFFO

$23.407

$16.486

$6.921

42.0%

AFFO Per Unit - Basic

$0.27

$0.23

$0.04

17.4%

AFFO Per Unit - Diluted

$0.26

$0.22

$0.04

18.2%

AFFO Payout ratio

84.6%

100.3%

15.7%

Excluding the impact of lease termination settlement:(1)

AFFO Per Unit - Basic

$0.23

$0.23

--

--

AFFO Per Unit - Diluted

$0.22

$0.22

--

--

AFFO Payout ratio

99.1%

100.3%

1.2%

(1) As discussed under Non-recurring items, Crombie recognized lease termination income from a national retailer for early termination of two leases.

The increase in FFO for the quarter ended December 31, 2012 was primarily due to the significant acquisition activity during 2011 and 2012. In addition, Crombie reached agreement with a national retailer for early termination of two leases. These increases were offset in part by increased general and administrative expenses.

AFFO for the quarter ended December 31, 2012 was $23.4 million, an increase of $6.9 million or 42.0% over the same period in 2011, due primarily to the improved FFO results as previously discussed.

(In millions of CAD dollars, except per unit amounts)

Year ended

Dec. 31

Variance

2012

2011

$

%

FFO

$90.737

$74.471

$16.266

21.8%

FFO Per Unit - Basic

$1.09

$1.09

--

--

FFO Per Unit - Diluted

$1.06

$1.04

$0.02

1.9%

FFO Payout ratio

82.7%

82.3%

(0.4)%

Excluding the impact of Refinanced Mortgages and lease termination settlement(1)

FFO Per Unit - Basic

$1.09

$1.09

--

--

FFO Per Unit - Diluted

$1.06

$1.04

$0.02

1.9%

FFO Payout ratio

83.1%

82.3%

(0.8)%

AFFO

$76.605

$60.051

$16.554

27.6%

AFFO Per Unit - Basic

$0.92

$0.88

$0.04

4.5%

AFFO Per Unit - Diluted

$0.90

$0.86

$0.04

4.7%

AFFO Payout ratio

98.0%

102.1%

4.1%

Excluding the impact of Refinanced Mortgages and lease termination settlement:(1)

AFFO Per Unit - Basic$0.91$0.88$0.03 3.4%

$0.23

$0.23

--

--

AFFO Per Unit - Diluted$0.89$0.86$0.03 3.5%

$0.22

$0.22

--

--

AFFO Payout ratio

99.5%

102.1%

2.6%

(1) As discussed under Non-recurring items, Crombie refinanced mortgages during 2012, resulting in refinancing expenses. In addition, Crombie recognized lease termination income from a national retailer for early termination of two leases.

The increase in FFO for the year ended December 31, 2012 was due primarily to significant acquisition activity which resulted in improved NOI results and, higher lease termination income. This was offset in part by increased general and administrative expenses and increased operating finance costs related to the acquisitions.

AFFO for the year ended December 31, 2012 was $76.6 million, an increase of $16.6 million or 27.6% over the same period in 2011, due primarily to the improved FFO results and the unfavourable swap agreement settlement of $1.7 million in the year ended December 31, 2011.

Property NOI - Cash Basis

(In millions of CAD dollars)

Three months

ended

Dec. 31, 2012

Three months

ended

Dec. 31, 2011

Year ended

Dec. 31, 2012

Year ended

Dec. 31, 2011

Property NOI

$43.116

$36.154

$163.300

$141.936

Non-cash tenant incentive amortization

1.533

1.333

6.332

5.169

Non-cash straight-line rent

(1.245)

(1.004)

(4.809)

(3.619)

Property cash NOI

43.404

36.483

164.823

143.486

Acquisition, disposition and redevelopment property cash NOI

10.645

4.504

32.824

14.720

Same-asset property cash NOI

$32.759

$31.979

$131.999

$128.766

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The 2.5% increase in same-asset cash NOI for the year ended December 31, 2012 is primarily the result of increased average rent per square foot from leasing activity during the past 12 months, completed land use intensification development projects and improved recovery rates.

Crombie believes that cash NOI is a better measure of AFFO sustainability and same-asset property performance.

Acquisition, Disposition and Redevelopment Property NOI

(In millions of CAD dollars)

Three months

ended

Dec. 31, 2012

Three months

ended

Dec. 31, 2011

Year ended

Dec. 31, 2012

Year ended

Dec. 31, 2011

Property revenue

$15.958

$7.561

$50.806

$25.788

Property operating expenses

5.217

3.127

17.997

11.673

Property NOI

$10.741

$4.434

$32.809

$14.115

Property NOI margin %

67.3%

58.6%

64.6%

54.7%

For the quarter ended and year ended December 31, 2012, the acquisition, disposition and redevelopment property results have significantly increased over the same periods in 2011. The growth is impacted by the significant acquisition activity during 2011 and 2012 as well as the increased focus on property redevelopment over that same period.

General and Administrative Expenses

General and administrative expenses for the quarter ended December 31, 2012 increased by 1.2% from 4.8% to 6.0% as a percentage of property revenue, when compared to the same period in 2011. Salaries and benefits increased due to the hiring of additional staff related to continued national growth and higher 2012 incentive payments. Other increases are primarily due to higher travel costs, training and development and increased public company costs.

General and administrative expenses as a percentage of property revenue increased by 0.5% from 4.7% to 5.2% as a percentage of revenue for the year ended December 31, 2012 when compared to the same period in 2011. Salaries and benefits increased due to the hiring of additional staff related to continued national growth and higher 2012 incentive payments. Other increases are primarily due to higher travel costs, training and development, increased public company costs and costs associated with due diligence on potential property acquisitions.

Finance Costs - Operations

(In millions of CAD dollars)

Three months

ended

Dec. 31, 2012

Three months

ended

Dec. 31, 2011

Year ended

Dec. 31, 2012

Year ended

Dec. 31, 2011

Same-asset finance costs

$10.942

$11.536

$46.855

$49.787

Acquisition, disposition and redevelopment finance costs

4.136

1.710

13.130

5.013

Amortization of effective swaps and deferred financing charges

1.561

1.732

9.424

7.348

Finance costs - operations

$16.639

$14.978

$69.409

$62.148

Same-asset finance costs for the quarter ended December 31, 2012 decreased 5.1% compared to the same period in 2011 primarily due to interest savings realized on the Refinanced Mortgages. Same-asset finance costs for the year ended December 31, 2012 decreased 5.9% compared to the same period in 2011 primarily due to the maturity of an interest rate swap in July 2011 on the revolving credit facility resulting in greater utilization of lower cost floating rate debt; interest savings from conversions of Convertible Debentures; and, interest savings in the quarter from the Refinanced Mortgages; offset in part by the approximately $1.5 million in cash costs incurred in the third quarter of 2012 related to the refinancing.

Acquisition, disposition and redevelopment finance costs have increased over the comparative period in 2011 due to the significant acquisition and redevelopment activity over the last two years.

Liquidity and Financings

Crombie's objectives when managing its capital structure are to optimize weighted average cost of capital; maintain financial flexibility through access to long-term debt and equity markets; and maintain ample liquidity. In pursuit of these objectives, Crombie utilizes staggered debt maturities, optimizes its ongoing exposure to floating rate debt, pursues a range of fixed rate secured and unsecured debt and maintains sustainable payout ratios. Crombie has an authorized floating rate revolving credit facility of up to $200 million, subject to available borrowing base of which $30.4 million was drawn as at December 31, 2012, and an additional $11.3 million encumbered by outstanding letters of credit, resulting in significant available liquidity. On February 22, 2013, Crombie temporarily increased the maximum principal amount of its revolving credit facility from $200 million to $285 million in conjunction with property acquisitions on that date.

Debt to gross book value is 50.0% (including convertible debentures) at December 31, 2012 compared to 52.5% at December 31, 2011. This leverage ratio is below the maximum 60%, or 65% including convertible debentures, permitted pursuant to Crombie's Declaration of Trust. On a long-term basis, Crombie intends to maintain overall indebtedness, including convertible debentures, in the range of 50% to 60% of gross book value, depending upon Crombie's future acquisitions and financing opportunities.

Crombie's interest and debt service coverage for the year ended December 31, 2012 were 2.61 times EBITDA and 1.76 times EBITDA respectively. This compares to 2.49 times EBITDA and 1.79 times EBITDA respectively for the year ended December 31, 2011.

The table below presents a summary of financial performance for the quarter and year ended December 31, 2012 compared to the same periods in fiscal 2011.

(In millions of CAD dollars, except per unit amounts)

Three months

ended

Dec. 31, 2012

Three months

ended

Dec. 31, 2011

(As restated)

Year ended

Dec. 31, 2012

Year ended

Dec. 31, 2011

(As restated)

Property revenue

$68.470

$58.682

$256.022

$226.138

Property operating expenses

25.354

22.528

92.722

84.202

Property NOI

43.116

36.154

163.300

141.936

NOI margin percentage

63.0%

61.6%

63.8%

62.8%

Other items:

Lease terminations

3.458

0.005

3.844

0.168

Depreciation and amortization

(12.493)

(8.302)

(44.570)

(31.387)

General and administrative exp.

(4.117)

(2.806)

(13.330)

(10.654)

Operating income before finance costs and taxes

29.964

25.051

109.244

100.063

Finance costs - operations

(16.639)

(14.978)

(69.409)

(62.148)

Operating income before taxes

13.325

10.073

39.835

37.915

Taxes - deferred

(1.500)

0.600

(0.100)

0.300

Operating income attributable to Unitholders

11.825

10.673

39.735

38.215

Finance costs - distributions to Unitholders

(19.809)

(16.530)

(75.079)

(61.283)

Finance costs - change in fair value of financial instruments

3.984

(6.417)

(1.878)

(8.644)

Decrease in net assets attributable to Unitholders

$(4.000)

$(12.274)

$(37.222)

$(31.712)

Operating income attributable to Unitholders per Unit, Basic and Diluted

$0.13

$0.15

$0.48

$0.56

Restatement of financial results

During preparation of the fourth quarter of 2012 financial results, Crombie determined that the conversion feature and redemption option attached to the convertible debentures represent a financial liability requiring fair value measurement each reporting period, with any adjustment to fair value being recognized through decrease in net assets attributable to Unitholders. The fair value adjustment is being accounted for as Finance costs - change in fair value of financial instruments in the decrease in net assets attributable to Unitholders.

This restatement is more fully explained in Crombie's Management Discussion & Analysis for the year ended December 31, 2012.

Non-recurring items included in 2012 operating income

During 2012, Crombie realized the following operating results which it considers non-recurring events:

In September 2012, Crombie assigned a portfolio of mortgages on 23 investment properties (the "Refinanced Mortgages") to a new lender. Concurrent with the assignment of the mortgages to the new lender, Crombie renegotiated the terms of the debt, refinancing them with a 30 month floating rate term credit facility. Included in Finance costs - operations are expenses of approximately $3.0 million associated with this transaction (approximately $1.5 million in cash costs related to legal fees, term loan set up fees and a repayment fee paid to the mortgage lender are included in same-asset finance costs and approximately $1.5 million representing the unamortized balance of deferred financing and other costs previously paid in respect of the 2008 mortgage financing are included in Amortization of effective swaps and deferred financing charges). The mortgages, with a weighted average interest rate of 5.91% and terms to maturity from 2013 to 2017, totaled $92.4 million, while the floating rate term credit facility of $92.7 million had an interest rate of 3.08% at December 31, 2012. The floating rate is based on bankers' acceptance rates plus a spread or prime rates plus a spread.

In December 2012, Crombie reached agreement with a national retailer on early termination of two leases resulting in lease termination income of $3.4 million. The two leases will terminate April 30, 2013, with the retailer paying rent until that date. Crombie's leasing and asset management staff are currently working on options for the space including replacement tenants and/or redevelopment opportunities for the properties.

Definition of Non-IFRS Measures

Certain financial measures included in this news release do not have standardized meaning under IFRS and therefore may not be comparable to similarly titled measures used by other publicly traded entities. Crombie includes these measures because it believes certain investors use these measures as a means of assessing Crombie's financial performance.

Gross book value means, at any time, the book value of the assets of Crombie and its consolidated subsidiaries plus deferred financing charges, accumulated depreciation and amortization in respect of Crombie's properties (and related intangible assets) and cost of any below-market component of properties less (i) the amount of any receivable reflecting interest rate subsidies on any debt assumed by Crombie and (ii) the amount of deferred income tax liability arising out of the fair value adjustment in respect of the indirect acquisitions of certain properties.

EBITDA is calculated as property revenue, adjusted to remove the impact of amortization of tenant incentives, less property expenses and general and administrative expenses.